3a (ii) A savings and loan offers a 6.5% rate per annum compounded daily over 365...

Question

Question

Answer 1

Answer #1

Answer 3a (ii)

Formula :

Effective annual rate = (1 + i/n)ⁿ - 1

where i = interest rate = 6.5% = 0.065, n = number of compounding periods = number of days = 365.

=> Effective annual rate = (1 + i/n)ⁿ - 1

=> Effective annual rate = (1 + 0.065/365)³⁶⁵ - 1 = 0.0672 = 6.72%

Hence, Effective annual rate = 6.72%

Answer 2

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